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The Children's (Scotland) Act 1995

This Act is about the protection and supervision of children, parental rights and responsibilities, children’s hearings and adoptions.

In terms of section 9, the Accountant of Court has a responsibility to ensure that property owned or due to children is properly administered.   If an executor (or trustee) is due to transfer property to a child who is under the age of sixteen and resident in Scotland he:

•           must seek a direction from the Accountant of Court if the
            value of the property exceeds £20,000.

•           may seek a direction from the Accountant of Court if the value of the property is not less than
            £5,000 but does not exceed £20,000.

•           If a person other than an executor (or trustee) is due to transfer property to a child who is under
            the age of sixteen and resident in Scotland he may seek a direction from the Accountant of Court
            if the value of the property is not less than £5,000.

•           If the property to be administered on behalf of a child is the subject of a Trust Deed, and the 
            nominated Trustees are willing to act or assume other Trustees who are willing to act, then a
            direction from the Accountant of Court is not required.  

In terms of section 13 of the Act the Court may make an order in respect of the administration of funds due to a child. Most commonly the order would relate to an award of damages.


Application for a direction
The application may be made by the fundholder or his/her solicitor in the form of a letter to the Accountant of Court. The letter should state the name and date of death of the deceased, the name, address and date of birth of the child whose funds require to be administered and the name of the child’s parent or guardian.

The application may be made before or after Confirmation has been obtained.


Directions
In terms of section 9 (5) of the Act, the Accountant of Court can grant one of three directions as to who can administer a child’s estate, namely:

Option1  -       Petition the Court for appointment of a Judicial Factor to administer a child’s estate until
                        he/she reaches 16 years of age.

Option 2 -      Transfer a child’s funds to his/her legal guardian to administer until he/she reaches 16 
                       years of age.

Option 3 -      Transfer a child’s funds to the Accountant of Court for administration until he/she reaches
                       16 years of age. 

Only in cases where there is likely to be conflict over the administration of a child’s funds, would the Accountant of Court consider it necessary to have a Judicial Factor appointed.

If the parent/guardian of the child wishes to administer the funds (option 2) the Accountant of Court will require him/her to meet the criteria for administering a child’s property. [linkto] Once that has been done the Accountant of Court will send out a draft direction for the approval of the parent/guardian. The draft may include conditions relative to the investment of funds, registration of heritable property and regular expenditure.

Once the draft has been returned to the Accountant of Court the principal direction will be signed and sent to the fundholder or his/her solicitor in order that the funds may be released for investment.

In many cases the Accountant of Court administers children’s funds directly. It is usual for the Accountant to maintain a bank account for each child containing sufficient funds for any anticipated needs.

Funds in excess of anticipated needs are normally invested in a fixed term/fixed interest product to increase the capital without exposing the fund to risk. Where the funds due to the child are substantial the Accountant uses a portfolio management service.

A small amount of commission is charged by the portfolio management service providers. The Accountant will advise the child’s parent annually of the balance of funds invested.   No administration or investment fees are charged by the Accountant.


Criteria
In cases where funds are being administered under the Children (Scotland) Act there is no cautionary cover. As a consequence some people may be automatically excluded from administering funds on behalf of children. In order for the Accountant of Court to be satisfied as a parent/guardian’s suitability, he/she is required to personally confirm in writing that:

•           he/she is financially secure in his/her own right
•           he/she has no untenable debts
•           he/she has never been made bankrupt,
•           he/she has no convictions for dishonesty or drug abuse
•           he/she has sufficient financial knowledge to instruct and review all investments made on behalf
            of the child. 


Conditions
These are standard conditions which may according to individual circumstances:

That the parent/guardian will invest the child’s funds having regard to independent advice that he/she will take.

That the parent/guardian will provide the Accountant of Court with a copy of their financial adviser’s recommendations for investment, prior to instructing the investment of the child’s funds. 

That the parent/guardian or his/her financial adviser will provide the Accountant of Court with a note of the actual investments made on behalf of the child no later than a specified date.
 
That no upliftments from the child’s funds will be made by the  parent/guardian without the prior approval of the Accountant of Court.

That annually the parent/guardian or his/her financial adviser will provide the Accountant of Court with a summary and valuation of all investments/funds held on behalf of the child.


Heritable Property
Further conditions may be included relative to heritable property (usually a house) owned or partially owned by a child. In certain circumstances a parent/guardian may be allowed to purchase a heritable property (or part of a heritable property) either as a family home or an investment.  

Standard conditions are given but may vary according to individual circumstances: 

•           That title to the heritable property will be registered in the name of the child.

•           That the parent/guardian will ensure that the heritable property will be properly maintained and 
            insured. That the parent/guardian will not sell or remortgage the heritable property without
            obtaining the prior approval of the Accountant of Court.
 
•           The Register of Scotland will register title in the name of a child.

•           A parent or person with the appropriate parental responsibility may act as a child’s legal
            representative and as such may transact with the child’s heritable property subject to the
            Accountant of Court’s approval.
 
•           In certain circumstances a parent/guardian may be allowed to borrow a sum from a child’s funds
            to assist with the purchase a heritable property.

•           The parent/guardian would require to grant a standard security in the child’s favour.


Investment
If the fund to be invested is small the parent/guardian may be allowed to retain it in an interest bearing bank or building society account. Otherwise the parent guardian will be required to seek the advice of an Independent Financial Adviser and submit his/her report to the Accountant of Court for approval.   The Accountant will not approve investment in any product that may prevent redemption without penalty once the child reaches the age of sixteen.   Investments should be held in the name of the parent/guardian named in the direction but preferably identified as the child’s funds, e.g. “Joe Bloggs on behalf of Jane Bloggs” or “Joe Bloggs in trust for Jane Bloggs”. It is important that the funds are identified as belonging to the child and not the parent (a) for tax purposes, and (b) to avoid confusion in the event that the parent dies.


Maintenance
If circumstances warrant it a monthly allowance may be made from a child’s funds to help with his/her maintenance. Parents should however bear in mind that they have a statutory duty to maintain their children.   The Accountant of Court will bear in mind a number of factors when considering a request for a regular allowance including:

•           the amount of funds due to the child
•           the age of the child
•           the financial position of the parent/guardian
•           whether a pension is paid from another source specifically for the child’s upkeep 

If the parent/guardian is seeking an allowance they should send the Accountant of Court a note of their monthly income and expenditure, together with a suggested figure. If child support or maintenance was being paid at the time of the parent’s death a note of the amount would assist the Accountant in making an award.   An allowance would only be permitted where the funds originated from the executry estate of a child’s parent/guardian.   If a child’s parent/guardian is in receipt of state support he/she should check how a maintenance allowance might affect his/her benefits.


Ad hoc payments

The Accountant of Court may allow funds to be released for items or activities of benefit to the child, e.g. educational trips, hobbies and activities, sports equipment and fees, musical instruments and lessons, contribution towards family holidays, school fees and uniforms, clothes and shoes, furniture for the child’s room, maintenance of a child’s heritable property.

A parent/guardian should first consider whether the items or activities can be funded by themselves or from another source.   Applications for payments should be made in writing to the Accountant of Court Relevant quotes, estimates or booking forms are helpful.   Requests for small amount may be made by telephone.   Parents/guardians may be asked to provide a receipt for expenditure.


Duration
A direction made by the Accountant of Court will end in the following circumstances:

•           On the child reaching sixteen
•           On the child's funds being exhausted*

*The direction will continue if the child’s the  funds are exhausted, if the child owns a heritable property, share in a heritable property or the child’s parent has granted a standard security in his/her favour.

A direction will continue if the child was habitually resident in Scotland at the time when the direction was sought and persists even if the child subsequently moves outwith the jurisdiction.


Discharge
The Accountant of Court will send a cheque to the child when he/she reaches sixteen for any funds held in the name of the Accountant. If the funds are invested in a portfolio the Accountant will advise the child that he/she may either redeem the investments or take over responsibility for the portfolio. If the child’s parent/guardian has been administering the funds the Accountant will advise him/her that the funds/investments must be transferred to the child.

The Accountant of Court will meet with the child shortly before his/her sixteenth birthday if requested to do so by the child’s parent/guardian.  The Accountant of Court will issue a Certificate of Receipt and Discharge to the child for his/her signature. Once the Certificate has been signed and returned the Accountant of Court will consider the matter closed.  Upon reaching sixteen the child is entitled to request an accounting of intromissions.